Variation margin relief sparks swaps pricing disputes

Banks divided over whether to price trades using current CSAs or theoretical new agreements

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Firms disagree over which collateral agreements to use when pricing trades

Confusion around how to price derivatives trades with counterparties still using collateral agreements that are not compliant with new margin rules is leading to disputes, according to dealers. Regulators in Canada, the European Union, Japan and the US have temporarily allowed banks to continue trading non-cleared derivatives with smaller counterparties using old collateral agreements, known as credit support annexes (CSAs), that have not been updated with the new variation margin requi